The owner of Branston Pickle stocked up on some of Britain’s best known brands after agreeing the #1.2 billion takeover of Hovis owner RHM yesterday.

Premier Foods will become the UK’s biggest food producer following the tie-up, which adds names such as Mr Kipling and Bisto gravy to a portfolio that already boasts Crosse & Blackwell products and Bird’s custard.

With annual sales in excess of #2.6 billion, the proposed company should be in a stronger position with the UK’s increasingly powerful supermarket chains.

The merger will produce annual costs savings and other benefits worth #85 million a year, which Premier admitted would involve job losses.

The Transport and General Workers Union, which represents over 2,000 workers at RHM's bakeries said they were concerned by the threat of cuts.

Brian Revell, T&G national organiser for food and agriculture said: "We will be looking for assurances on both issues and will be urging Premier to meet with us as soon as possible.

"This takeover bid does pose questions as Premier will, no doubt be looking to cut costs."

However, Premier said it was too early to discuss the impact on the combined workforce. St Albans-based Premier has 3,000 staff, some of which work at its Stafford factory producing Cadbury's hot chocolate.

RHM, which has a bakery in Birmingham, has more than 15,000 people at 50 locations in the UK and France.

Premier chief executive Robert Schofield said the two companies had been talking for more than a year about a possible merger.

He said: "We’ve known for some time that this is a combination that had to happen.

"This is a natural combination that has compelling industrial logic."

Premier Foods has been a regular on the acquisition trail since it listed on the stock market two years ago, buying the UK arm of Oxo and Homepride firm Campbell’s Soup for #450 million in July.

However, it failed in its effort to buy McVitie’s, Penguin and Jaffa Cake owner United Biscuits in a #1.7 billion deal over the summer.

Mr Schofield said his company had picked up some "tremendous British brands".

RHM’s breads divisions sells products such as Hovis and Mother’s Pride, while its culinary brands arm has well-known names such as Bisto, Paxo, Sharwoods, McDougalls and Robertson’s. The cakes division is the largest in the UK, with brands such as Mr Kipling, Cadbury’s and Lyons.

Premier Foods’ other brands include Hartley’s, Angel Delight and Quorn.

Bucks-based RHM has endured some challenging trading conditions since its flotation last year. The group supplies around one third of the UK’s daily bread, delivering in excess of two million fresh loaves and rolls to more than 9,000 supermarkets and small independent stores nationwide every day.

It took urgent action to revive the performance of its Mr Kipling business earlier in the year, while recent trading has been impacted by a huge increase in wheat prices.

Jan du Plessis, chairman of RHM, admitted the high wheat prices were an issue. He said: "It is fair to say that business is having difficulty, but Hovis is taking market share. The underlying brand is very strong."

Premier said it had no plans to sell any of the brands being bought yesterday. It will keep RHM’s breads operation as a standalone division, while integrating cakes and culinary brands into its own grocery arm.

The offer represents a premium of almost 30 per cent on the RHM share price prior to the deal being announced. RHM investors are being offered a mixture of cash and Premier shares in a deal which values each RHM share at 352.45p.

RHM was sold to a private equity group in 2000 for over #1.1 billion by engineering firm Tomkins – which grew out of the Walsall-based F H Tomkins Buckle Company.